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Money

Seattle's $15 Minimum Wage Plan Is Probably Not Going to Crash Its Economy

Some writers have been wringing their hands about how the minimum wage hike in Seattle will spell doom, but we should be celebrating instead of panicking.

by Matt Taylor
May 6 2014, 9:20pm

Seattle activists marching in favor of a $15 minimum wage this January. Photo via Flickr user pnwbot

Wherever there are fresh ideas about how to create balance in our dystopian society and reduce inequality, you can be sure trolls will emerge touting the Iron Laws of Economics and warning reformers to back off and accept the world as it is. We saw this with the Occupy Wall Street protests, during which fancy liberals at national media outlets couldn't help but lampoon a bunch of dirty hippies camping out in a park in lower Manhattan.

This truism has been on display over the past week as a series of columns have come out slamming the $15 minimum wage plan currently being considered by officials in Seattle, Washington—which if enacted would make that city arguably the best place to work on the planet. The authors use a few charts and economic studies to make the case that such a massive bump in the city's income floor could have catastrophic effects on its labor market, reducing employment and even speeding the trend toward automatization of fast-food jobs, which we've seen in high-tax locales in Western Europe. (One writer cites the allegedly terrifying specter of making the hiring of workers in Seattle more expensive than it is in France. Oh God, France! The HORROR.)

But before we start writing the obituary for one of America's largest progressive cities, we should keep in mind that the wage boost is being phased in over a period of three to seven years, a fact glossed over by critics but that is in fact the key detail here—a compromise that the most radical advocates of a generous wage increase like socialist City Councilwoman Kshama Sawant have opposed tooth and nail. Far from being the most aggressive proposal out there, the plan actually on track to clear the city council steers a centrist course between upsetting the local economy and keeping businesses happy.

"What is important is the phase-in period rather than the number," said Dean Baker, an economist and founder of the Center for Economic and Policy Research. "It's fair to say if we were going to make it $15 next year I'd be very worried. But if you make it [that] over 7 years, there's 15 percent inflation or somewhere around there, so in today's dollars a $15 minimum wage would be something in the order of $12.75 [by the time it takes effect]. Right off the bat that sounds less worrisome. You're not going to see firms going out of business because of this."

"It's not really a very radical experiment once you have these long phase-ins," agreed Jared Bernstein, former chief economic adviser to Vice President Joe Biden. "The thing about these minimum wage increases is that predictions about their impact have historically been wrong."

So please, let's not start panicking about endtimes for Seattle and its utopian ideals of economic fairness. It's necessary to at least pause and consider research that shows minimum wage hikes can have a modest negative affect on overall employment—specifically among teenagers—but as Slate's $15 wage critic Jordan Weissmann himself points out, that side effect is perfectly acceptable so long as most workers are making out better in the long run. What data is there to suggest that will not be the case for Seattle?

Given the structural problems we have with poverty in this country, a movement in one northwestern city to tilt the conversation to the left on wages strikes me as not just a potentially good thing, but an obviously laudable one that might serve to dramatically shake up the conventional wisdom about how to improve the lot of the poor. After all, members of Congress aren't lifting a finger to hike the federal $7.25 minimum wage, which has been in place since 2009, despite President Obama's call for a meager bump up to $10.10. Seattle has the capacity to upset the status quo, boost the quality of life for workers, and make a lot of economists and political elites look stupid in the process.

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